For Dennis

Honeywell international, Inc. is a well-known transnational USA based corporation well known for the production of a wide range of products like aerospace systems, developing products and providing services. It has a wide customer base including both individual clients and other hefty businesses including governments. The company was on the list of the Dow Jones industrial Average Index from 12/7/1925 to 2/9/2008. The company’s headquarter is in New Jersey (Morristown). The company has a huge number of workers with 130, 000 workers. 58, 000 of the employees are inside the States. The company also belongs the top 100 Fortune companies list. The company was able to cling on to the 500 Fortune companies of the United States in 2012. David M. Cote is the existing CEO of the company and Mark C. Honeywell back in 1906 established the company. Back then it was positioned in Wabash, Indiana with the nametag Honeywell Heating Specialty Co Inc... The company went through an amalgamation with the Minneapolis Heat Regulator Company. Major area of expertise of the company is Aerospace that consists of control systems, electric power equipments, engine parts, Avionics, displays, communication equipments, navigation devices etc. The company’s clients including the local ones plus countries like China, Brazil, and Australia etc.

(Investor, 2014)

The Boeing Company is a multinational company based on USA. It produces variety of products which include aerospace systems, engineering products and services. Its consumers are from individual customers to various large corporations and also governments. It is listed in Dow Jones Industrial Average Index. It’s headquarter is located in Chicago. It produces fixed-wing aircraft, rotorcraft, rockets and satellites. It also offers leasing and product support services. James McNerney is the chairman and CEO of Boeing (Boeing, 2014).

The revenue report of Honeywell indicates the total profit of the company, the sum of all operating costs and returns. According to the report, the company’s total earnings in 2014 are $10,691 million which means 27.3 percent of the total income and the operating-expense is $5198 for the mentioned year and it comprises of Research and development expenditure, nonrecurring expenditures etc. Once the expenditures are subtracted from the total-income, the total earning results $5,493million and are 14.06 percent of the returns generated. After summing up the additional returns, the result is returns before the interest and excise that is $5,739 million and is 53.68 percent of the total-returns. The company’s interest expenditure is $327 million with 1,450 million income-taxes. The total-returns are $3,962 million after subtracting the expenditure from the EBIT which is the total-income to general shares and is 10.41 percent of the total-returns. The following table shows the income statement for the period from 01 January 2013 to 31 A Balance sheet resembles the status of the company’s financial and capital composition. Honeywell has current assets of $21,164 million as of 31st December, 2013. The items under current assets are cash & cash equivalents assets, short-term investments, net receivables, inventory and other current assets. Total assets of this company are $45,435 million as of 31st December 2013. Long-term asset consists of $393 million of long-term investments, $5,278 million of PPP, $13,046 million of goodwill, $2,514 million of Intangible assets and $3,040 million of other assets. Honeywell has $14,181 million of current liabilities as of 31st December 2013. It comprises of $5,174 of Accounts payable, $2,028 million of current portion of long-term debt and $6,979 million of other liabilities. Honeywell has the stockholders equity of $17,467 million. Retained earnings are of $20,383 million. The organization has common stock of $958 million.

December 2013 of Honeywell International Incorporation:

Honeywell’s Cash flow statement represents the net cash position and net changes in cash flow as of 31 July 2014. Honeywell’s Cash flow statement shows the total cash flow from operating activities is $4,335 million, total cash flow from investing activities is $(1,959) million and total cash flow from financing activities is $(433) million. The exchange rate effect is amounted to $(155) million. The following table shows the cash flow statement of Honeywell as of 31 December 2013

In the Honeywell’s statement of owner’s equity the ending balance of common stock is $5,640 million. The beginning balance of retained earnings is $17,799 million, comprehensive Net Income is $3,924 million and ending balance of Retained Earnings is $20,383 million. The total stockholder’s equity is $17,579 million that also includes the changes caused by treasury stock, accumulated other comprehensive loss and non-controlling interest. The following table represents the changes in common stock and retained earnings of the company for the period 2012 to 2013:

In this section the current ratio, cash ratio and quick ratio of Honeywell for the last five years have been calculated. Current ratio determines the firm’s capability to pay its short-term obligations with existing short-term assets (Horrigan, 1978). It is calculated by dividing total current assets by total current liabilities. The current ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 1.5, 1.3, 1.3, 1.3 and 1.3 respectively. Quick ratio determines the firm’s capability to pay its short-term obligations with existing assets that are more liquid compared to that of current ratio. The denominator of quick ratio is summation of cash & cash equivalents with short term investment and account receivables and the numerator is current liabilities. The quick ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 1.1, 1.0, 0.9, 0.8 and 0.8 respectively. The cash ratio determines how quickly the company can meet its obligations. The denominator of Cash ratio is summation of cash & cash equivalents and short term investment and the numerator is total current liabilities. The Cash ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 0.6, 0.4, 0.3, 0.3 and 0.3respectively.We can conclude from these ratios that Honeywell’s capability to meet its obligations are not up to the mark. But, as the ratios are in an increasing trend we can expect that it will reach to a satisfactory level of ability to pay short-term liability. The trend of its liquidity ratios are given below in a chart:

In this section the Debt ratio, Debt to Equity ratio and Times Interest Earned ratio of Honeywell for the last five years have been calculated. The debt ratio represents the state of a company’s leverage (Nissim & Penman, 2001). It is calculated by dividing total liabilities by total assets. The Debt ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 0.62, 0.69, 0.73, 0.72 and 0.75 respectively. The debt-equity ratio represents the proportion of debt and equity that are used to finance the assets. It is calculated by dividing total liabilities with total stockholders’ equity. The Debt-equity ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 160%, 223%, 268%, 255% and 306% respectively. The times interest earned measures the company’s ability to pay its interest .It is calculated by dividing the interest expense with net income. The times interest earned ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 0.083, 0.120, 0.202, 0.197 and 0.3.respectively. We can conclude from these ratios that Honeywell’s capability to meet its long-term debt obligations is in an increasing trend .The trend of its debt ratios are given below in a chart:

In this section the profitability ratios of Honeywell for the last five years have been calculated. Profitability ratio measures a company’s capability to generate revenues in comparison with its costs and other expenses that are incurred in a period of time. I have estimated the profit margin ratio, return on asset and return on equity ratio .The profit margin ratio assesses how much of each dollar the company retains in its earnings from its sales. It is calculated by dividing net income with total revenues. The Profit margin ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 10%, 8%, 5%, 6% and 5% respectively. The return on assets (ROA) assesses how efficiently the management is utilizing the company’s assets to generate earnings. It is calculated by dividing net income with total assets. The ROA ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 9%, 7%, 5%, 5% and 4% respectively. The return on equity (ROE) assesses the firm’s profitability by finding out how much earnings the company is generating with the money invested by equity holders. It is calculated by dividing net income applicable to common stockholders’ with the total stockholders’ equity. The ROE ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 23%, 23%, 17%, 18% and 17% respectively. We can conclude from these ratios that profitability is in an increasing trend and they are consistent. The trend of its profitability ratios are given below in a chart;

In this section the asset utilization and management efficiency ratios of Honeywell for the last five years have been calculated. I have estimated the total asset turnover, inventory turnover and account receivable turnover. The total asset turnover measures a firm’s efficiency in generating earnings by using its assets. It is calculated by dividing total revenue with average total assets. The total asset turnover of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 0.9, 0.9, 0.9, 0.9and 0.8 respectively. The inventory turnover assesses a firm’s ability to manage and maintain its inventory. It is calculated by dividing cost of revenue with the average inventory. The inventory turnover of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 7,7,7,7 and 7 respectively .The account receivable turnover assesses the firm’s efficiency in providing credit and collecting debts. It is calculated by dividing net total revenues with average account receivables. The account receivable turnover of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 5,5,5,5 and 10 respectively. These ratios are more or less consistent over the five years. So, we can conclude that the firm is showing efficiency in asset utilization and management. The trend of its efficiency ratios are given below in a chart:

In this section the price to earnings ratio, earnings per share ratio and dividend payout ratio of Honeywell for the last five years have been calculated. The earnings multiplier assesses a firm’s current share price compared to the firm’s earning .It is estimated by dividing price per share with earnings per share. The price to earnings ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 15,16,23,17and 17 respectively. The earning per share (EPS) is part of the company’s profit that is assigned to each outstanding share. It is estimated by dividing net income applicable to common shareholders’ with number of shares outstanding. The earnings per share ratio of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 5.05, 3.74, 2.41, 2.50and 2.0 respectively. Here we can see that the trend of EPS signifies that the organization is earning satisfactory return for its stockholders. The dividend payout ratio is a tool which determines the organization’s percentage of earnings paid to its stockholders. It is estimated by dividing dividend per share with earning per share. The dividend payout of Honeywell in December 2013, December 2012, December 2011, December 2010 and December 2009 is 1.68, 1.53, 1.37, 1.21 and 1.21 respectively (NASDAQ.com, 2014). The trend of its market measures are given below in a chart:

In this section I have shown the multiples and different ration analysis of Honeywell and that of the respective industry. This section represents the available comparable ratios that are collected from websites cited in the references. The analysis includes

In this section the comparable ratios and multiples of Microsoft Corporation and of the respective Business Software & Service industry is analyzed. Here I have considered available comparable ratios of the industry from the website cited in the reference page. The analysis includes P/E ratio, ROE ratio, dividend yield, debt to equity ratio, price to book value ratio, profit margin, and the market capital. The table below shows the results of each ratio of Honeywell and the respective industry:

The above table shows that Market Capitalization of Honeywell is 0.84% of the industry. The Price/earnings ratio and Price/Book value ratio of Honeywell are lower than that of the industry average.Net profit margin of Honeywell is higher than that of the industry. Return on Equity of Honeywell is very high than that of the industry average. Debt to equity ratio is lower than that of the industry. It indicates a positive result of the company. The company is providing higher dividend yield than that of the industry.

The table below represents the comparison between the selected company and the largest competitor selected as the benchmark company:

Honeywell has higher liquidity position than the benchmark competitor. Honeywell has lower leverage than the benchmark company. We can also see that Honeywell has better profitability status than the benchmark company. But the benchmark company has higher ROE than Honeywell. The efficiency level of both of the organizations is reasonable. The market measures of both companies are also satisfactory.

The total dollar value of all outstanding shares of Honeywell is $74.26 billion. The PEG ratio is 1.65 against its projected 5-year growth. So, it indicates a positive result. The adjusted EPS is 4.99 which are satisfactory. Beta coefficient is 1.29.It is not perfectly correlated with the market. The 52-week change and S&P 52-week change show that the share price has fluctuated slightly.50 day moving average price is $93.21 and 200-day moving average price is $91.96. The expected dividend in the current year is 1.8.The 5-year average dividend yield is 2.5% and also forward annual dividend yield is 1.9%. There is a table below which presents the key statistics of the company:

We have collected the historical monthly prices data of the 5 years starting from 2009 to 2013. The purpose of this data collection is to forecast the next year’s stock price. I have used moving average for this purpose. At first, I opened Microsoft excel software and then data analysis toolpack to estimate the moving average. From this analysis, I concluded that the stock price is $87.63 for the next year.

To decide if the corporation’s stock is a good buy or sell the historical monthly prices data of the 5 years period from January 2010 to December 2013 of Microsoft Corporation is used here. To forecast the stock price for the next year I have used the moving average technique in the excel spreadsheet from data analysis tool pack. From the moving average method, the forecasted stock price is $37.33 for the next year. There is as graph below which presents the firm’s historical share price and the trend of the forecasted value through moving average:

The above forecast is reasonable, reliable and in line with the firm’s continuing high performance and high profitability. The dividend payment forecast is 1.9%. This is in line with the firm’s forecasted price.

Honeywell’s capital structure represents that it is using 39% of equity and 61% of debt to finance its activities. Although it may seem higher but it is much lower than the industry benchmark. Again, it makes Honeywell exposed to financial risk. Honeywell’s dividend policy is motivating and attractive to investors. It shows stability and consistency during the last five years. Honeywell has low price to earnings ratio compared to that of industry average. It signifies that Honeywell is a less risky corporation to invest in. The volatility of its stock is low according to the experts’ opinion. The market information of this company is also available. The stocks are fairly valued. The bankruptcy risk is very low. It has a low-key hype condition. It almost mirrors the market. So, all these information provides a positive sign that it will provide a high performance in the long run.